Why Some Experts Question Whether the 2026 Negative Gearing Changes Will Improve Housing Affordability
- Future Accounting
- May 28
- 6 min read
Written By: Melissa Cunliffe (CA)
The 2026 Federal Budget introduced one of the most significant changes to Australian property taxation in decades. The key measures include:
Restricting negative gearing largely to newly built properties from July 2027
Replacing the 50% capital gains tax (CGT) discount with an inflation-indexation model and minimum 30% tax rate
While largely grandfathering existing investments under the current rules
The government says the reforms are designed to improve housing affordability and encourage more investment into new housing supply rather than established dwellings.
While the policy objectives are broadly understood, economists, property analysts, tax professionals and industry groups remain divided on how effective the reforms will be in addressing Australia’s broader housing affordability challenges.
Housing supply remains the central issue
A consistent theme across commentary from economists and housing experts is that Australia’s affordability pressures are primarily being driven by a long-term imbalance between housing demand and housing supply.
Australia continues to face significant challenges in meeting housing construction targets, with the building sector still dealing with:
Rising construction costs
Labour shortages
Planning and approval delays
Infrastructure constraints
And increasing regulatory complexity
Many analysts argue that tax policy alone cannot resolve these structural supply-side issues.
Redirecting investor demand toward new housing may assist at the margin, but experts note that additional housing can only be delivered if projects remain financially viable and the construction sector has the capacity to build at scale.
Population growth and housing demand pressures
Another factor increasingly discussed by economists is the role of strong population growth in driving housing demand.
Australia’s population has grown rapidly in recent years, supported by high migration levels, while housing supply has struggled to keep pace. Many experts note that this has placed additional pressure on both rental markets and property prices, particularly in major cities.
Importantly, most commentary frames this as an infrastructure and housing delivery issue rather than a political debate around immigration itself.
A growing number of analysts suggest that meaningful affordability improvements require housing supply, infrastructure and planning systems to keep pace with population growth. Without sufficient housing delivery, affordability pressures are likely to remain regardless of tax policy settings.
Will the reforms improve housing affordability or reduce prices?
At this stage, most economists are not forecasting a substantial fall in property prices as a direct result of the reforms.
A number of analysts expect only modest downward pressure on established dwelling prices, largely because underlying demand remains strong while supply remains constrained.
Factors continuing to support prices include:
Ongoing population growth
Limited housing supply in many regions
Elevated replacement and construction costs
And continued demand from owner-occupiers
For first-home buyers, experts note that affordability is influenced by more than just purchase prices. Higher interest rates, rising living costs and the difficulty of saving deposits remain significant barriers to entering the market.
Concerns around rental supply
One area receiving considerable attention from economists and industry groups is the potential impact on rental supply.
Australia’s rental market is already experiencing historically low vacancy rates in many locations. Some analysts warn that if future investors become less willing to purchase rental properties — particularly established homes — rental availability could tighten further over time.
Importantly, many rental properties are created when investors purchase existing homes and place them into the rental market. Critics of the reforms argue that limiting tax incentives on established properties may reduce the willingness of some investors to acquire these homes as rental investments.
This creates a difficult policy balance:
Reducing investor competition for first-home buyers
While also maintaining sufficient rental housing supply for tenants
Housing experts note that many Australians will continue to rely on renting for extended periods due to affordability pressures, lifestyle choices or financial circumstances. Maintaining adequate rental supply therefore remains a critical part of the broader housing system.
Several commentators have pointed to the importance of the grandfathering provisions in limiting disruption to the existing rental market and reducing the risk of large-scale investor exits.
Existing investors versus future investors
Another observation raised by economists and tax professionals is that the reforms may affect future investors more significantly than existing asset holders.
Because many current investments are grandfathered under existing rules, established investors generally retain access to:
Current negative gearing arrangements
Existing CGT treatment
And the tax settings under which their investment decisions were originally made
As a result, some analysts suggest the changes may have a greater impact on younger or future investors seeking to enter the market than on existing property owners.
Broader investment implications
The CGT reforms extend beyond residential property and also apply to other investment assets, including shares and businesses.
Professional bodies such as CPA Australia have noted that the changes may alter long-term investment behaviour and increase complexity for some investors.
Concerns raised by commentators include:
Lower after-tax investment returns
Reduced policy certainty
And the potential impact on long-term private investment decisions
Many experts note that investment decisions are typically made over extended timeframes, meaning stability and predictability in tax settings can play an important role in investor confidence.
Tax and record-keeping considerations for property owners
Regardless of where individuals stand on the policy debate, the proposed changes highlight the growing importance of maintaining accurate tax and property records.
For investors, detailed documentation may become increasingly important, particularly where properties transition between private use and income-producing use.
This may include maintaining clear records of:
Purchase dates and settlement documents
When a property first became available for rent
Periods of private use
Renovation and capital improvement costs
Loan and interest records
Depreciation schedules
And supporting documentation for CGT purposes
Given the proposed grandfathering provisions, the timing of when a property was acquired and when it became an income-producing asset may become especially important in determining future tax treatment.
With the proposed reforms likely to increase complexity around CGT calculations, grandfathering provisions and investment timelines, proactive tax planning and accurate record keeping may become more important than ever.
Tax professionals are also encouraging investors to seek advice before making structural decisions involving property ownership, refinancing, or changes in property use, as the long-term tax implications may become more complex under the proposed framework.
What experts say could improve affordability
While views differ on tax policy, there is broader agreement among economists and industry participants that long-term housing affordability improvements are likely to require substantial supply-side reform.
Commonly proposed measures include:
Streamlining planning approvals
Reducing development bottlenecks
Infrastructure investment to unlock new housing areas
Improving workforce capacity in construction
Supporting financially viable development projects
And creating conditions that encourage sustained housing construction
Many analysts argue that increasing overall housing supply remains the most important long-term factor in improving affordability outcomes.
Final thoughts
While the 2026 negative gearing changes may reshape investor behaviour, many experts believe housing affordability challenges are unlikely to be solved through tax reform alone. Supply shortages, population growth, construction constraints and rental demand all continue to play a significant role in Australia’s property market.
From a tax and accounting perspective, the proposed reforms also highlight the importance of strategic planning, accurate record keeping and understanding how investment decisions may affect long-term tax outcomes.
Under our 3P’s Future Prosperity model we look things from a holistic perspective. If you own investment property — or are considering entering the market — our team can help you understand how the proposed changes may impact your position and ensure your records, structures and tax planning are prepared for the future. Book an appointment with us today to discuss your property strategy with confidence.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
